fall_2009_part_2_starting_a_business - TAX 6845 Tax...

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TAX 6845 – Tax Planning and Consulting Case Part 2: Starting a business (20 points) To be completed in small groups 2-3 due date: September 29, 2009 In early January 2009, Steve Stumberg has decided to open a retail business that will sell flowers, trees, and other plants to homeowners and professional landscapers. Other investors include Jesse Lee, and Jason Kiley. The business will incorporate and be known as Black Hammock Nursery (BHN). Lee and Kiley will each contribute $150,000 and will each receive 25% of the BHN stock. Stumberg contributes $100,000 cash and will receive 50% of the stock. He agrees to work for the corporation for 2 years at reduced compensation to help it through what is expected to be a difficult start-up time. The issuance date for Stumberg’s stock is yet to be determined. Restrictions on Stumberg’s stock also are being considered. BHN purchases a building and land for $956,000 borrowing $725,000 at 5.25% (assume that it is an interest only loan). They estimate that the value of the land is somewhere between $106,000 and $145,000. BHN also purchases equipment for $55,000 (7-year MACRS property).
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fall_2009_part_2_starting_a_business - TAX 6845 Tax...

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